Indonesia partners global construction, mining trade fair

Indonesia is the partner country for this year’s largest construction and mining equipment trade fair, Bauma 2013, scheduled for April in Munich, Germany. Ahead of the event The Jakarta Post’s Ati Nurbaiti was among the journalists invited to the “media dialogue” with organizers and exhibitors in late January in Munich, Germany. The report follows.

The Alps were the backdrop for a lunch buffet in a venue in Munich, where visitors were welcomed by the red and white flag, along that of Germany and a Bauma banner, fluttering in the wind at the world’s largest trade fair.

“Partner country Indonesia” accompanies all announcements and flyers for Bauma 2013, the construction and mining equipment exhibition slated for April 15 to 21 in Munich’s spring.

A few months ahead of the event there were no other signs of Indonesia’s presence apart from badges stating “Welcome Indonesia”.

An empty space for the country’s pavilion and lounge were already allocated on the massive grounds of the upcoming construction machinery, building material machines, mining machines, construction vehicles and equipment fair, the site covers 555,000 square meters.

Among the thousands of participants, some began erecting their huge pavilion spaces as far back as November. Some pavilions are not just show spaces for the bulldozers, wheel loaders, crawlers or crushers but fabricated multi-story levels and self-contained spaces — all to be dismantled in a few weeks at the end of the exhibit.

Organizers — the trade show firm Messe Muenchen International and Germany’s construction machinery and building materials Machinery Association Federation, (VDMA) — hope that the memorandum of understanding signed in May last year with Public Works Minister Djoko Kirmanto, during a visit to Germany along with collaborations with Indonesia’s main business associations, will ensure strong participation from the construction and mining industries.

“This is an opportunity to be on the world stage, said VDMA’s Joachim Schmid. “We are telling exhibitors not to forget Indonesia.”

The VDMA is the co-organizer of several Bauma events, with Messe Muenchen, the company that focuses on global construction machinery trade fairs. Other events this year will be held in Mumbai, India, in February and Johannesburg, South Africa, this September. Last year Shanghai, China, also hosted a Bauma exhibit.

To promote Indonesia, the tagline “Profit from the world’s largest market” can be seen on flyers and Indonesian delegates will be entitled to free entrance to the exhibit, saving some US$50 per person for the week.

Indonesia will also host a Bauma exhibition in 2014.

Germany’s mining machinery sector exported some 92 percent of products, according to the most recent data, contributing to the country’s survival amid Europe’s downturn, said chairman of the German trade association of mining machinery manufacturers, Paul Rheinlander, as quoted in a Bauma release.

Rising demand for raw materials, especially from the emerging economies, continue to be a promising prospect for Germany’s mining and mining machinery sector. Organizers cite the upcoming soccer 2014 World Cup and the 2016 Olympic Games, both in Brazil, as events that would require intensive infrastructure preparation.

Many business players in Germany and Europe are less aware of Indonesia’s economic strength and potential, said Messe Muenchen’s chief representative and senior executive officer Wolf-Dietrich Mueller, despite its more or less steady economic growth above 6 percent in the past years, and its strong construction sector.

Organizers are aware that the Indonesian government’s plans to invest US$465 billion in infrastructure; oil, coal and gas extraction; and electricity power plants by 2025. The World Bank’s financial arm, the International Financial Corporation (IFC), cites Indonesia’s more conducive regulations for infrastructure investment, such as the land acquisition law.

IFC notes that infrastructure plans should attract joint ventures involving foreign companies, given the vast need for experience, as the government will only fund 30 percent of government projects. Many foreign companies also lack the experience of dealing with the Indonesian business side, thus, these interactions could be facilitated by the trade fair.

New opportunities in mining and mining infrastructure also lie in Indonesia’s expected export ban on mineral ores.

To process minerals the 2009 Law on mining obliges firms to build smelters, though critics say a planned ban on the export of ores by 2014 is far from realistic, given the huge investments and time it takes to build and operate smelters. Nonetheless, companies from South Korea and China were among those that grabbed the opportunity and won bids to building smelters.

Confusing regulations seem insignificant when lined up with the country’s potential; the organizers cite data from the Energy and Mineral Resources Ministry that shows that Indonesia ranks sixth in the world regarding raw material reserves, and 15th in coal.

Bauma notes that total investment in the Indonesian mining sector was around $3.2 billion in 2010, including $764 million in coal. Bauma also cites predictions by a market surveyor, Business Monitor International (BMI), that the value of production in mining will reach $123 billion by 2014.

For those who have heard of Indonesia, some are discouraged by the complaints of doing business in one of the world’s most corrupt nations. It is very difficult for German companies to do business while engaging in corruption, said Schmid.

“However, we tell them that if they don’t try to come to Indonesia, to live there and try to understand the country, they will never know that eventually it might be possible to do business without corruption,” Schmid said.

Among the exhibitors were those with long time Indonesian clients, and others said they were considering the country.

The last exhibition was hosted by China last year, with exhibitors and guests confident of the economy despite the drop in world coal prices and decreasing demand from China.

Overall political stability is clearly a primary factor of trade fair organizers linking business players with markets and potential joint venture partners in China, India, Indonesia, the Gulf countries and Africa’s sub-Sahara.

Despite Indonesia’s political uncertainties ahead of the 2014 general election, continuing reports of large scale corruption involving big business players and confusing regulations, the appeal of Indonesia’s market and further potentials is “definitely worth the risk”, said Daniel Bergquist, a representative from Scania, a long time partner of Indonesian mining businesses.

At Scania, a Sweden-based corporation, a new organization is being set up under the group for a consultancy for mining, particularly on how industries might best save costs, apart from Scania’s current business of selling equipment. These services are essential to newcomers in the industry and newcomers to countries like Indonesia, Bergquist said.